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Wednesday, December 25, 2013

Merry Christmas to America's 48 Million Unemployed

The main reason why America is still experiencing mass unemployment going into 2014 is because, for decades, our economy has transformed from a manufacturing economy (with good paying union jobs) into a service economy (with low paying "right to work" jobs) --- mostly because of outsourcing and offshoring. Congress has passed trade agreements and wrote a tax code that actually encourages this.

To make matters even worse, the government plans to redefine manufacturing, artificially boosting GDP and artificially lowering the trade deficit --- by reclassifying foreign made products (such as Apple's iPhones that are manufactured in China) as "Made in America".

If we want to put more people to work (and avoid paying a basic income to millions who can't find work), America's "job creators" have to start creating jobs in the U.S., rather than overseas. American industries, rather than just creating digital dollars on their corporate balance sheets, also have to start actually creating "things" here in the good ole U.S.A.

Betty Sutton (a Democrat and former U.S. Representative for Ohio's 13th congressional district from 2007 to 2013), by using data from the Bureau of Labor Statistics, found that there were 398,887 private manufacturing establishments of all sizes in the United States during the first quarter of 2001.

By the end of 2010 however, the number of factories had declined to 342,647, a loss of 56,190 facilities. Over a period of 10 years, that worked out to be an average yearly loss of 5,619 factories.

Dividing that number by the 365 days a year, that gives us 15.39 as an average daily number of factory closing during that time. Politicfact rates this as true.

Since 2010, that number has fallen even further --- from 342,647 in 2010 to 334,800 in 2012 --- for an additional loss of 7,847 more manufacturers in two years alone. As the Wall Street Journal reported last year, "Thirty-five big U.S.-based multinational companies added jobs much faster than other U.S. employers in the past two years, but nearly three-fourths of those jobs were overseas."

What's been helping to drive this mass exodus of U.S. manufacturing overseas are base pointers like Walmart. Walmart claims, "We work directly with manufacturers, eliminating costly markups." If by "work with," they mean "dictate to," then Walmart's claim is accurate. But again, as Charles Fishman, the business reporter who wrote The Wal-Mart Effect asks, "What is the high cost of these low prices?"

Walmart's market power is such that many of its suppliers face a stark choice: take dictation from Walmart, or lose half or more of their business. To survive in the face of Walmart's pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

Just ask Steve Dobbins, CEO of 75-year old Carolina Mills, a company that supplies thread and yarn to textile manufacturers --- half of whom supply Walmart. His company grew steadily until 2000. Then his customers (with Walmart's gun to their heads) began a hemorrhage of offshoring in order to find the dirt cheap labor necessary to meet Walmart's low price demands. Carolina Mills shrank from 17 factories to 7 within three years. The way Walmart "works with" its suppliers has been disastrous for American workers. (More here)

Rep. Betty Sutton had noted that many big companies have not created jobs in the U.S. Instead, they’ve taken many of their jobs to countries with the cheapest labor, the least regulations and the fewest labor rights. "This flies in the face of the Republicans’ concern that taxes on the rich means fewer jobs," she said.

Both Republicans and Democrats have been guilty for allowing this to happen.

Bill Clinton's infamous trade deal (NAFTA) was explicitly designed to place our manufacturing workers in direct competition with the lowest paid workers in the world. The agreement came into force on January 1, 1994.

In 2000 Bill Clinton also signed into law the U.S.-China Relations Act of 2000, which granted permanent normal trade relations trade status to the People's Republic of China.

Just since 2000, the U.S. population has been growing about three times as fast as jobs have been. Had job growth kept up with population growth, we would have had 11 million more people working today. And also since 2000, corporate pretax profits (adjusted for inflation) have more than doubled, reaching record levels --- as have stock values on the Dow Jones, S&P 500 and Nasdaq. Remember, this was also when we had lost 56,190 manufacturing facilities. A mere coincidence?

Now President Obama is pushing for another trade agreement (TPP) which has been described as "NAFTA on steroids". A study by the Center for Economic and Policy Research shows 90% of U.S. workers would see their wages decline as a result of TPP --- and it would also raise their internet costs and drive up prescription prices as well. (Free trade agreements are never "free" for American workers).

When jobs are offshored, Americans also lose the multiplier effect --- especially in manufacturing. As factories get "smarter" and more advanced, the multiplier increases significantly. In some advanced manufacturing sectors, such as electronic computer manufacturing, the multiplier effect can be as high as 16-to-1 (meaning that every manufacturing job could support 15 other jobs).

And it's not over yet. A study shows that almost 1/3 of all current domestic jobs are still prone to being outsourced or offshored.

In May of 1953 the U.S. had a record-low unemployment rate of only 2.5% (think of labor unions and lots of factories in those days). Now look at the chart below, using the labor force participation rate when comparing the number of people employed versus the number of people unemployed in the civilian working-age population of the U.S.

Virgil Bierschwale at Keep America at Work asks, "Will you finally wake up when the unemployment and the employment percentages meet in the middle?"

Based on his calculations (excluding almost 9 million disabled workers), Virgil believes that the U.S. has over 48 million Americans unemployed (not 10.9 million as the government reports for a U-3 rate) --- or a 15.3% unemployment rate if we based it on the total population. But he also says that if we just based it on the working population, we would have an unemployment rate of 24.2%.

John Williams, the statistician at Shadowstats.com, calculated the unemployment rate to be 23.2% (very close to Virgil's estimates). And in a recent article at the Economic Populist titled Employment Stats Misleading, Paul Craig Roberts (former Assistant Secretary of the Treasury under Ronald Reagan) had agreed.

In a survey for Investor's Business Daily, they asked: "How many members of your household are currently unemployed and are looking for employment?" The results from their IBD/TIPP Poll indicated that 47.9 million Americans were looking for work. (also very close to Virgil's estimates).

Some good people in Congress, who once were fighting for American jobs, no longer can --- because just like Rep. Betty Sutton of Ohio, gerrymandering by the GOP had prevented her from being reelected again in 2012.

* As an aside: Are U.S. taxpayers spending millions of dollars every year to ensure that foreign countries comply with international labor laws (set forth in our "free" trade agreements) --- and are taxpayers also paying to Power Africa, creating another "emerging market" so that American-based corporations will have another source of cheap labor and foreign revenues? Are Americans paying to have their jobs sent to all four corners of the globe? Just wondering. Because, if so (and at this rate), the U.S. might one day be the next new "emerging market".

Special Report: The super-rich are being deprived of the true meaning of Christmas. The nation's poor get to experience the true Christmas spirit, whereas the wealthy, burdened by shopping and party obligations, are being left out in the cold.

Merry
Christmas and Happy Holidays to 48 million unemployed Americans who might have
the opportunity to experience the "true" meaning of Christmas.

4 comments:

"In the United States and Canada, a 2 percentage point increase in GDP output is associated with about a 1 percentage point decrease in the unemployment rate." (Maybe that will all change by reclassifying manufactures.)

I was laid off in October 2008. Today marks my 6th consecutive Christmas (and Birthday, Thanksgiving, and soon to be New Years) that I've spent unemployed after being (mostly) employed for the previous 36 years.

Blogster-at-Large

Bud Meyers writes about the economy, politics, Social Security, corporate outsourcing, labor statistics, the REAL unemployment rate, taxes and tax evasion, government and corporate corruption, and the plight of the long-term unemployed.

Update: In 2016 Bud transitioned from Bernie Sanders (who was running as a Democrat) to Donald Trump (who ran as a Republican). But he doesn't trust either party. His previous posts may contradict how he feels right now for numerous reasons . . . he's "evolved" — and if Trump kills Social Security and Medicare, he'll evolve again ;)